Edexcel A-level Economics A – Theme 1 Multiple Choice Questions

What is meant by the term “opportunity cost”?

• The amount of money required to start a business

• The next best alternative foregone when a choice is made

• The cost of producing one extra unit of output

• The cost of all alternatives considered

If the price of a product rises and total revenue falls, the demand for the product is likely to be:

• Perfectly inelastic

• Unit elastic

• Price elastic

• Price inelastic

Which of the following is a characteristic of a public good?

• It is rival and excludable

• It is non-rival and excludable

• It is rival and non-excludable

• It is non-rival and non-excludable

A PPF (Production Possibility Frontier) that is concave to the origin shows:

• Increasing opportunity cost

• Constant opportunity cost

• Decreasing opportunity cost

• No opportunity cost

A subsidy to producers will normally cause:

• A leftward shift of the supply curve

• A rightward shift of the demand curve

• A leftward shift of the demand curve

• A rightward shift of the supply curve

What is the main purpose of price mechanism in a market economy?

• To allocate resources efficiently

• To ensure maximum profit for producers

• To maximise consumer surplus

• To set interest rates

Which of the following is most likely to lead to market failure?

If demand is perfectly inelastic, what will happen to total revenue if the price increases?

• It increases

• It decreases

• It stays the same

• It becomes zero

An inferior good is one for which:

• Demand rises as income rises

• Demand falls as income falls

• Demand rises as income falls

• Demand is unaffected by income

Consumer surplus is the difference between:

• What consumers are willing to pay and what they actually pay

• Cost of production and the selling price

• Total revenue and total cost

• Price and marginal cost